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Price review 2009
Capital Expenditure Incentive Scheme (CIS) – illustrative worked example In Setting price limits for 2010-15: Framework and approach we confirmed that we will use CIS to set expenditure assumptions and associated rewards or penalties for out- or under-performance. In that document we explained how the CIS works and the process for setting the baseline capital expenditure. The document also set out, in broad terms, the approach to the ex-post reconciliation for outturn capex and the associated rewards/penalties. We have also indicated that we would publish a worked example to detail how the CIS ex-ante allowances and the ex-post reconciliation might work in practice. The accompanying excel spreadsheet provides a simplified, illustrative worked example. The spreadsheet contains data and a number of assumptions for the purpose of this illustration. These are explained in the 'assumptions' worksheet which should also be consulted for a description of the inputs and calculations contained. The CIS parameters used for the purposes of this illustration are those set out in PR09/02. However both the CIS parameters and the reconciliation illustrated by the model are purely for indicative purposes. Our PR09 documents should be consulted for our policy approach to setting price limits.  |
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